Start a Clothing Business Today: Expert Tips and 10 Steps With Helpful Resources
If you want to start a clothing business, the industry is booming. Entrepreneurs are flocking to several states and to the Internet to get into the game. You can build a profitable store with the right information, some expert help, and a one-stop-shop to start and manage your business. If you’re not in one of the best states to open a boutique, a clothing store is one of the best online business opportunities today.
You can start an online clothing business pretty fast and without a lot of cash. We’ll cover how to start an online clothing store and introduce our affordable E-Commerce solution to get you started quickly. Read our guide to learn about startup costs, business planning, and how to register a company. We’ll cover some of the best states to set up shop and introduce you to simple and affordable tools to help along the way.
If being a clothing retailer is for you, MyCompanyWorks can form your company with an online Limited Liability Company (LLC), Corporation, or DBA package. We’ll start on your order, usually within one business day, and process everything we can from start to finish. Some orders require mail-in or walk-in applications, but we’ll prepare the paperwork so all you have to do is sign and drop it off with the local business authority. Our goal is to make the process simple and painless.
Starting a clothing business can be a great experience, but not every entrepreneur wants to handle paperwork, accounting, and taxes. We work with reputable partners to take care of your business matters, so make sure to check out the resources below. Let’s get started!
Why Start a Clothing Boutique
On average, a retail store brings in between about $23k and $140k for the owner. Niche clothing and consignment store owners make roughly $52k annually. If you’re running an online clothing store, you can increase revenues by selling in online forums like Instagram and through your website. Consumers are constantly looking for new styles and better clothing options. In the digital age, retailers are finding success beyond foot traffic, thanks to online shoppers. Now is prime time to take advantage of the internet and local demand for variety. Women’s clothing, baby lines, and outerwear are all in high demand, but the options are almost endless, and you can satisfy demand by opening a specialized store.
PRO TIP: Consignment stores and boutiques that sell gently used clothing are considered “recession-proof” since there’s no need for new production. They simply recycle and upcycle current inventory to generate sales. Used clothing stores are a great model for startups on a small budget.
Best States to Open a Boutique
The following states are some of the best places to start a clothing business, thanks to perks like low or no sales tax, tourist incentives, and population density.
Delaware: Dover, DE is more than just a top spot for clothing shops. The city and surrounding areas cater to tourism with an active nightlife scene, music festivals, pristine beaches, and tasty cuisine. Delaware doesn’t charge sales tax on clothing, so consumers are inclined to spend more on these items.
Minnesota: The North Start State draws shoppers from all over the midwest and even Canada. The Mall of American in Minneapolis is the largest mall in the US, and a shopper’s paradise with 550 stores spread out over 2.87 million square feet! Minnesota is home to a variety of cultures, so clothing from all over the world sells to residents and tourists alike.
New Jersey: Known as one of the largest shopping districts in the world, New Jersey makes a great home for clothing shops because it’s a popular tourist destination and there’s no sales tax on apparel. Fashion designers also flourish in the Garden State since it’s close to New York, considered by many to be a major hub for fashion and design.
New York: Even though New York charges sales tax on various transactions, you can still open a successful clothing boutique. The state is known around the world for everything from fashion to fine food and attracts millions of visitors each year. Sales tax is determined by the county where you do business, so the rates vary.
Oregon: Oregon is visited regularly by fashion enthusiasts, and both major and independent brands thrive together. Oregon does not charge sales tax on clothing, which is a great way to encourage higher sales. Portland is already home to many successful clothing stores, but the suburbs are growing, and some really cool shops are popping up in surrounding areas.
Pennsylvania: The Keystone State brings together both old and new in a unique quarter of the US. Pennsylvania is home to some of the best agriculture, as well as cities like Pittsburgh and major sports teams. There’s no sales tax on clothing, and shoppers flock to places like the King of Prussia Mall and city centers to shop for new trends and old favorites.
Rhode Island: There is clothing sales tax in Rhode Island, but only on purchases of $250 or more, so it’s still a favorable place to open a store. You’ll find a mix of independent boutiques and name-brand shops in places like Providence and Newport. Historic areas also attract successful retailers.
TIP: If you’re ready to start a business in any of these states, click on the highlighted state name to get started.
Open a Clothing Store Online
If you don’t live in one of the best states for clothing stores, you can start an online clothing business. MyCompanyWorks offers a custom Domain, Email, and Website package to open your clothing store online. Customizable templates and simple tools are included to start a clothing website fast.
You can start an online clothing shop with little to no money. Drop-shipping businesses like Bloom Wholesale send clothing items directly to consumers, so you don’t have to front the cost of inventory and shipping. Once your customer orders online, you order items from your suppliers to fulfill the orders. You pay the supplier from the money collected from your customer. If you’re interested in drop-shipping, check out some of the top wholesale clothing suppliers here.
What’s Needed to Start a Clothing Business
- The right business name and entity type
- An effective business plan
- Federal tax ID
- Business bank account
- Brick-and-mortar or online store (or both)
- Business licenses and permits
- Systems for record-keeping and accounting
- Staff training and employee handbook (if you’ll have employees)
- Marketing plan to attract business
Helpful Startup Resources
Open a Retail Shop in Your State | Choose Your Business Entity | Explore Some of the Best Business Ideas
How to Start a Clothing Boutique
Research: Before you spend a dime, you should take the time to research clothing styles, popular materials, and suppliers to find your niche. Once you have this information, you can study your area to see what’s missing and solve the problem by adding those items to your product line. Stay on top of fashion trends and find timeless pieces to offer. Shirts, pants, shoes, jewelry and accessories, purses, and baby clothes never go out of style.
Study competitors and decide on competitive price points. Research the companies and brands that grab your attention, then learn their strategies to draw new customers.
Plan: Plenty of entrepreneurs start a business without a plan. Unfortunately, they rarely succeed. If you want to build a profitable business, you’re going to need to see what that looks like before you open a store. You can avoid pitfalls and save money with a solid business plan to chart progress and find weak areas in your strategy. We’ll show you how to write a business plan in Step 2 below.
Execute: If you have done your research and developed a solid strategy, you’re ready to register your business and open the doors. Opening a clothing boutique is a process, but we’ll walk you through that process in the following 10 steps. Whether you’re opening a brick-and-mortar store, an e-commerce store, or both, we can help you form your clothing business online.
10 Steps: How to Start a Business in Clothing
1. Research and Select a Business Name and Entity Type
An effective name represents your business identity
What’s in a name? More than most people think. Your clothing store’s name should tell potential customers what you’re selling and identify your target market. If you’re selling women’s clothing, you want to make sure to convey that in your business name and/or marketing materials (logo, branded merchandise, etc.).
Ask your family and friends to help you pick a great business name. Jot down ideas, pick out words that describe the nature of your business, then practice the top names out loud. Imagine hearing them as a customer on the phone.
Do the names tell customers that you selling clothing? Is it easy to tell from your name what kind of clothing is sold? Is your name unique, so you won’t be confused with another company? Is your name easy to remember?
These questions are important to ask when you’re developing an effective business name. A catchy, unique name that defines your clothing store and can grow with your business is the best bet for building a business identity that stands the test of time. our Business Identity guide has more information on how to pick the best name for your clothing boutique.
The entity types for clothing stores
The Limited Liability Company or LLC is the most popular entity choice for small business startups. An LLC provides limited liability to business owners and is easier to manage than a Corporation. But there are times when a corporation business structure would be the best for your shop. Our accountant partners can help you make the best decision.
- LLC (Limited Liability Company): An LLC is simple to manage and doesn’t require company tax returns. Instead, business expenses, losses, and gains are reported on individual owners’ personal tax filings. The LLC offers limited liability to owners, so personal assets and finances aren’t usually subject to tax liens and lawsuits. LLCs can apply for S-Corporation status with the IRS to maintain small business status.
- Corporation: The Corporation business structure is usually formed for large, more complex companies. Corporations that meet certain requirements can file for Subchapter S – or “Small Business” status with the IRS, so you’re still taxed as an individual. Unless you’re advised to start a Corporation by a tax or law professional, we recommend starting an LLC to keep business and tax paperwork simple.
- DBA: DBA, or “Doing Business As” is also known by names like Fictitious Name, Assumed Name, or Trade Name. You can start doing business with a DBA without an LLC or Corporation, but a DBA does not offer the same liability protection. To truly separate business and persona matters, you’ll need to apply for a federal tax ID number, or Employer ID Number (EIN).
An EIN is optional for DBAs that don’t have employees, but you’ll have to use your personal social security number on business, tax, and legal documents if you don’t have one. Using an EIN instead of a social security number can help prevent identity theft. You can add an EIN application to any clothing startup package.
Ask a tax professional which business type is best for your clothing boutique
2. Write an Effective Business Plan
Why your clothing company needs a business plan
A well-crafted business plan shows investors that you’re serious about growing your business and have a map to lead you to success. If you’re borrowing money, you’ll need a business plan to detail short-term and long-term goals along with how you’ll reach those goals. There’s no need to re-invent the wheel with a business plan. The internet is full of templates you can customize for your company’s needs. Our Small Business Plan guide offers tips to get you started.
Find startup funding
NOTE: Funding requirements will vary for different clothing stores. Be prepared to share startup and ongoing costs to get a good idea of how much funding you’ll need.
Find funding for your clothing boutique:
- Personal savings, home equity, and retirement accounts are great places to start building startup cash. If you’re going to apply for additional funding, investors like to see that you’re investing as much of your personal dollars as possible.
- Borrow from family and friends. About $89 billion for startups is borrowed from relatives and friends each year. Relatives and friends should be rewarded just like professional investors. Consider offering incentives like interest on loans or free clothing items or discounts. Click here to learn more about borrowing startup funds from friends and relatives.
- Angel investors. Professional investors put their money toward thousands of startups each year. According to the Agnel Capital Association, $650 million was invested in startups in 2020. Wealthy individuals make startup funding available to small businesses for a portion of ownership in the businesses they support. If you want to find angel investors, startengine, Gust and Funded.com are great resources.
- Crowdfunding. SeedInvest, Kickstarter, and IFundWomen can help you set up an account and start your crowdfunding campaign. They also offer other options to raise startup cash quickly.
TIP: Investors want to know you’re serious about running a successful store. Paying bills, payroll, taxes, and business on time will help you build good business credit and develop a solid track record.
Related Helpful Resources
Write a Business Plan Fast | A Guide to Business Types | What is Business Credit?
3. Obtain your Federal Tax ID (Employer ID Number, or EIN)
If you plan to hire employees, the IRS requires you to apply for an Employer Identification Number. You’ll also need one to open a business bank account and file taxes for your clothing shop. An EIN is optional for DBAs if you’re not hiring workers, but we recommend obtaining one to use instead of a personal social security number. You can apply for an EIN at the IRS website if you have a Social Security number. International applicants must meet additional requirements and apply by phone.
TIP: We can apply for your EIN when you order any clothing business package.
4. Open a Business Bank Account
The easiest way to keep business and personal money and assets separate is to open a bank account just for your boutique. A business bank account is also necessary if you want to build business credit. Local banks and credit unions are a good place to start researching business banking options. If they don’t offer business banking solutions, our business banking partners can help you open a business bank account online. Requirements vary by bank, so it’s a good idea to research your options before opening an account.
5. Set Up an Online Store or Lease Shop Space (or both)
If you’re running a drop-ship clothing store, you might be able to work from a home office. All you need is a suitable computer and a website with an e-commerce store to start shipping when items sell. We offer a simple and affordable Domain, Email, and Website with an E-Commerce package to launch your online boutique fast.
For a brick-and-mortar store, foot traffic, demographics, and location are critical to your success. A commercial real estate firm can help you find the best location for your clothing shop. Need a commercial leasing broker? Our Vendor Network has a list of qualified agents to help you find the right space.
6. Apply for Business Licenses and Permits
Clothing retailers usually don’t have to apply for federal licensing, but the state where you do business will require you to be licensed. Your local business authority can help you find the proper licenses and permits, or you can order a business license compliance package from our partners to apply for the proper licenses in one place.
7. Pay for Business Insurance Policies
Not all business insurance is required, but it’s definitely worth considering to protect your employees and investment. Insurance requirements vary by industry and business type, but the policies listed are common and recommended.
- Business Owner’s Policy
- General Liability
- Workers’ Compensation
We work with Hiscox and netQuote to offer affordable business insurance with exclusive pricing for MyCompanyWorks clients.
8. Establish Accounting and Filing Systems
Accounting software like Quickbooks Online is easy to learn and manage. There are loads of free tutorial videos on YouTube. You can also hire a qualified financial professional from our exclusive Vendor Network.
It’s getting easier to run a paperless business, but you’ll still need to keep an organized filing system for bills, taxes, and employment files. Organizing a filing system before paperwork arrives is the easiest way to manage important business records. Your system doesn’t have to be fancy, but it should make it easy to find the following documents:
- Files for customer information and preferences
- Documents related to employees, like applications, signed W4 forms, and annual reviews
- Vendor information like contact information, product specs, contracts, and catalogs
- Tax, legal, and business documents such as business formation documents, tax returns, pending lawsuits, etc.
Find out how long business records should be kept.
9. Interview and Hire Boutique Staff (Optional)
Skip this step and bookmark the page if you’re going to hire employees later.
Recruit staff that share your vision
Desperate employers often hire the wrong staff and spend untold money on retraining and turnover. Finding the right people can take time, but it’s critical to your success. Some skills can be taught, but you want to hire employees who align with your vision and can represent your business well. You can take a free personality test yourself, then ask applicants to take the same test to recruit the right team. Compare applicant test results to your own to see which candidates would work best with your personality type.
Read pro tips to develop and motivate a winning team
Indeed, LinkedIn and Craigslist are popular sites for posting job ads. You can usually post a job ad for free or for little cost with these companies. Follow these tips for the best recruiting results:
- Write an employee handbook and train your team
A simple, but clear employee handbook will convey expectations to new staff while giving you a process to follow to develop your team. Adding a signature page will enforce your policies and require employees to acknowledge they have read the handbook. Free templates can help you write an employee handbook quickly.
- Each job description should be clearly defined
If you’re hiring staff and management, you’ll need different job descriptions for each role. Include expected tasks, environment, and general conduct to appeal to qualified candidates. Spending some time writing detailed job posts will reduce the number of unqualified applications and wasted interviews. Also, candidates like to know what kind of work they’re applying for, so listing important details like business hours and lifting requirements can help a candidate decide whether or not your clothing shop is a good fit for them. On average, you can expect to interview up to 10 candidates to fill one open position.
- Interview qualified candidates and hire your team
You could receive hundreds of applications just for one position, so it’s important to take time to eliminate applications before you start interviewing. If you’re only hiring for one position, you should schedule between 6 and 10 interviews. Hiring qualified candidates who share your vision is a process, but you’ll save on training and turnover costs if you only interview applicants with the right skills and personality. Indeed.com offers a free guide to help you hire the right team for your shop.
10. Tell the World a New Clothing Store is Open!
Website, social media, and email campaigns
Remember the yellow pages? Before the internet, we would thumb through a huge book of yellow pages to find businesses. The book is still published, but an online version has emerged to accommodate web surfers. You can advertise your clothing shop in the yellow pages, but a better option would be to sign up for a yellowpages.com ad and start a website and social media accounts.
70% of potential customers are inclined to purchase from clothing stores with an active website and social media accounts. Social companies like Instagram and Facebook are very popular with clothing shoppers, so make sure to set up accounts with your business name, logo, and contact details.
Insightful newsletters with relevant content still attract business, so make sure to set up a free account with a service like Mailchimp. They have templates that are easy to customize and coordinate with your brand. Visit their help guides to answer common questions and launch your newsletter. Once you have your account and template set up, establish a schedule for your newsletter. If you’re just learning how to manage a newsletter, starting with a monthly, or even quarterly newsletter is a realistic commitment. You can always ramp up newsletter campaigns later, but starting slowly will allow you to build a following and perfect your skills at a reasonable pace.
TIP: Add a newsletter sign-up bar to your homepage to collect email addresses from potential customers.
You don’t have to be a web designer to build a website. Just make sure to include information like business hours and contact details. Brick-and-mortar shops can register for a free local business profile with Google My Business. MyCompanyWorks offers a Domain, Email and Website (plus Ecommerce option) (DEW) package so you can launch your website simply, quickly and at a great price. If you’re going to sell clothes on your website, you can add an E-Commerce upgrade to any DEW package.
Considerations for successful digital marketing
- Quality product shots if you’re selling online
- Set Up Social Media – Instagram, Facebook, Twitter
- Explore paid advertising options
- Professional SEO Services to draw traffic to your website
- Blog including fashion tips, outfit photos, seasonal articles, etc.
- Videos of store and product
- Email marketing and newsletters
Start an LLC or Corporation Online
If you’re ready to open a shop, MyCompanyWorks can work with you to start an LLC or Corporation fast. Each formation order comes with our exclusive Startup Wizard to walk you through the process. Order your startup package for any state in the US. Select LLC or Corporation on our Business Formation page, then select your state and scroll down to Choose Your Filing Speed for live turnaround times.
Summary
Fashion and retail are hotter than ever, and online boutiques and drop-shipping solutions are popping up to take advantage of the boom. Retail boutiques can generate great income and provide self-employment for anyone who is motivated and has a solid plan. You can also offer apparel that is hard to come by in your area, which will make you stand out among competitors.
There are several states to consider if you want to open a physical store, but you can open a store online and appeal to shoppers all over the world. MyCompanyWorks can start your LLC, Corporation, or DBA fast, and we offer comprehensive packages for any business. Visit our blog for more helpful guides and resources to start and manage a successful boutique. Our Frequently Asked Questions (FAQ) page answers many common startup questions and our support team is standing by to walk you through the business formation process.
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